Six Ways to Evaluate a Store Assortment

The desire to impress a client with a wide choice is very commendable, but must have reasonable boundaries. How to try to please the customer not to inflate the assortment of the store? How to build an assortment matrix in such a way as to get maximum profit at optimal cost? About these and other aspects of the assortment policy of the store in a series of articles will tell the experts of the Clever Fashion consulting company. This time, fashion marketing professionals share with the readers of the Shoes Report magazine the most effective analysis methods that allow them to evaluate the existing assortment matrix.

The path to optimal assortment

Sooner or later, any business faces a difficult but interesting task: to find a compromise between a wide range that requires significant costs and a limited line of products, which, on the contrary, allows you to free up funds for the development of the company. In this case, you should always remember the relationship between the breadth of the assortment and the cost of production. Analysts say that if the assortment is halved, productivity will increase by one third, and costs and break-even will decrease. And, accordingly, with an increase in the number of items, the opposite situation arises. However, the desire to increase productivity and reduce costs by narrowing the assortment can lead to extremes: too carefully and narrowly selected assortment threatens with poverty and inability to satisfy consumer needs, and as a result, loss of customers and profits.

Where is the line between the optimal assortment and its extreme, inefficient forms? In the ideal case, the assortment is balanced so that it does not require unnecessary costs, but is able to satisfy consumers' needs and maintain their loyalty. As a rule, such a balance is achieved as a result of hard work and accurate calculations, ongoing research, analysis and forecasting of future periods. The task is complicated by the fact that each enterprise and the market situation are unique, and in order to succeed, the company must systematically use analysis tools and effective management. A set of these measures is important, since assortment analysis without a clear strategy will not solve the problem of optimizing business processes. No matter what software and personnel resources the store possesses, it is necessary to effectively set the tasks of analysis and choose the appropriate methods. It is important to diagnose the situation in the store, determine the key problem and solve it today, since tomorrow it will require more expensive measures.

To each according to his needs.

Any assortment analysis should be based on a top-down principle: at the first stages, a study of large commodity blocks is carried out - it allows you to see the main trends; then the product subgroups that make up each block and the product lines by type or brand are sequentially analyzed. This sequence helps to determine how effectively a particular subgroup is located in the sales area and whether it meets the nature of demand in general. Without this top-down approach, efforts to optimize assortment within a product group can be meaningless.

Depending on the tasks and internal conditions, the assortment analysis can be carried out by different methods. Here are the main ones.

Dynamics analysis turnover, profit, average purchase amount and number of purchases. Allows you to identify trends in the development of the store, adjust the range and pricing strategy in the inactive groups.

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Analysis of the amounts and structure of checks. The main purpose of this method is to determine the effectiveness of merchandising; assess how well the retail space “works”; evaluate the assortment and pricing policy by highlighting individual groups of buyers; analyze shopping baskets and identify the most common items in receipts. By analyzing the amounts and structure of the checks, the co-purchases are also apparent.

Analysis of the structure of turnover and profit (ABC analysis). This method allows you to identify the most important product groups, subgroups and brands in the total profit of the enterprise. The essence of the method is to distribute the entire assortment according to three parameters: category A comprises the most valuable goods, which form 20% of inventories and bring 80% of profit; category B is composed of intermediate in value goods that create 30% of inventories and bring 15% of total profit. Finally, category C is represented by the least valuable products. They make up 50% of inventory and form 5% of all sales. For the most indicative results, such an analysis is recommended once a quarter.

Analysis of the elasticity of turnover defines the groups of goods that are most sensitive to changes in the market situation, consumer and competitive environment. With its help, you can understand how each product group makes a contribution to the increase and decrease in turnover. The analysis of the elasticity of turnover is often applied to sales of seasonal goods.

XYZ analysis allows you to evaluate the stability of sales by product groups and to predict the nature of consumption in the future period. In the course of this analysis, all goods are distributed according to factors of seasonality, deficit, special shares for sales and on the basis of this they are divided into three categories. Category X is formed by goods showing stable sales; category Y consists of goods whose sales are unstable, but trends in demand for them are known; Category Z is made up of goods that are purchased irregularly, and trends in demand for them are difficult to trace. XYZ analysis helps to choose methods of working with these groups, to determine the value of inventories of each category and the frequency of their replenishment in the warehouse.

Analysis of the effectiveness of the use of retail space used to solve the problem of demand for product groups. This analysis evaluates the effectiveness of retail space, identifies problem areas of the premises and potentially promising merchandising areas. The global goal of analyzing the effectiveness of the use of retail space is the most profitable use of each square meter of retail space.

Any of the above analysis methods can serve the company a good service in the formation of assortment policy. But you should always remember that the development and optimization of the assortment matrix of the store should be complemented by consumer research. Knowing your client and understanding the key segment for the company helps to clearly and clearly position your business. And this, in turn, will partially allow us to answer a significant part of the questions related to the formation of the product range.